Financial Services Talking Points | 27/07/2017

In today’s talking points: Foreign banks get easier access to investment in China’s domestic lenders; IMF headquarters could shift to Beijing in a decade; Ethical investing grows in popularity; Shanghai to continue with reforms in free trade area.


Foreign Banks Get Easier Access to Investment in China’s Domestic Lenders

China is continuing to liberalise the financial sector, with recent clarification of the rules on overseas bank investment favouring foreign banks looking to invest in domestic lenders.

Prior to the statement by the China Banking Regulatory Commission, investment into China’s domestic banks could only be carried out by a foreign bank’s parent company. This clarification has meant that this could now be carried out by locally incorporated subsidiaries, although the investment cap remains at 20 percent.

This is seen as a move to encourage more foreign banks to establish subsidiaries in China in a broader shift to localise foreign banks. This would promote not only greater investment into smaller lenders, but would also allow regulators to better monitor and manage capital flows, according to She Minhua, an analyst at Zhong De Securities Co.

Read more at: China Daily

 

IMF Headquarters Could Shift to Beijing in a Decade

The headquarters of the International Monetary Fund (IMF) could be relocated to Beijing from its current base in Washington D.C. in a decade, according to IMF Managing Director Christine Lagarde.

IMF bylaws state that the headquarters be based in the member with the largest economy, and if China continues its current rate of growth, it may take this position from the US in the future.

This comes after continued reforms by the IMF, which has prioritised better representation of its member economies.  This includes quota and governance reforms which gave greater weighting to growing emerging market economies away from advanced economies, in particular those from Europe. Another round of quota reviews is currently underway and is expected to finish by 2019.

Read more at: China Daily

 

Ethical Investing Grows in Popularity

Over the past three years Australian responsible investments have more than quadrupled, currently making up for $622 billion worth of the country’s managed assets, according to the Responsible Investment Association Australasia (RIAA). Responsible investment emphasises sustainability, environmental protection, social obligations and negative screening. The primary driver of this trend is not individual investors but superannuation fund managers who are becoming aware that ethical investments generally yield greater returns. This flies in the face of the long-standing myth that ethics and sustainability must be sacrificed for financial returns.

Read more at: Sydney Morning Herald

 

Shanghai to Continue with Reforms in Free Trade Area

Emphasis has been placed on deepening reforms in Shanghai’s free trade area by city planning authorities, in a move seen as a trial for a potentially national wide reform agenda. These reforms are in line with others taking place in Shanghai, which are aimed to transform Shanghai into an innovation and technology hub, and consolidate its place as an international finance centre. To complement these reforms the government will also be rolling out initiatives to stimulate entrepreneurship and research.

Read more at: Shanghai Daily